Have equity in your home? Want a lower payment? An appraisal from Edward Miller Appraisal Services can help you get rid of your PMI.When buying a house, a 20% down payment is usually the standard. Since the liability for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a borrower defaults.
During the recent mortgage boom of the mid 2000s, it was common to see lenders only asking for down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than what is owed on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. Instead of a piggyback loan where the lender takes in all the losses, PMI is advantageous for the lender because they acquire the money, and they get paid if the borrower defaults.
How can homebuyers avoid paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute home owners can get off the hook a little earlier. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
Since it can take many years to reach the point where the principal is only 80% of the original amount of the loan, it's essential to know how your Texas home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have gained equity before the economy simmered down. So even when nationwide trends forecast decreasing home values, you should know most importantly that real estate is local.
An accredited, Texas licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At Edward Miller Appraisal Services, we know when property values have risen or declined. We're experts at analyzing value trends in Houston, Harris County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: